As the price of DRAM sits below the variable manufacturing cost of between $1.30-1.50, DRAMeXchange believes that second tier DRAM producers faced with weakening cost structures should start to cut production. Recently, top tier suppliers Elpida, PSC and Hynix announced DRAM production cuts, which reduced total global DRAM production by approximately 5 to 6 percent, according to DRAMeXchange.

Should second tier suppliers follow DRAMeXchange’s advice, then global production could fall by as much as 6 to 8 percent in total. DRAM spot price has dropped by approximately 20 percent since the end of the Beijing Olympics, DRAMeXchange noted.

DRAMeXchange said that DRAM makers can no longer rely on the bit growth in projecting their output. Instead, they must focus on the sales revenue and return on assets as their primary targets. The vast majority of DRAM manufacturers have recorded losses for 7 quarters in a row, marking one of the worst periods in history for the sector.